The missing economic manifesto clarity

As Pakistan enters a new election cycle, it is imperative that political parties should come up with not only actionable steps but to indicate very clearly whether the economic philosophy that they are following is either neoliberal or social democratic, broadly speaking. This is important to understand in which of the two distinctly different boats they are sitting, which take discretely separate routes to the somewhat common goals of resilient, sustainable, green economies.

That appears to be the root cause of the problem at hand, whereby political parties have given ‘slogans’ of a country free of debt burden, where there is little unemployment, inflation is reined in to reasonable levels, and business confidence, and with it investment flows are healthy, yet the ‘thought-process’ appears to reflect poverty of deep thinking, which is based on the experience of performance of neoliberal or social democratic economic philosophies that, in turn, form the core for success or failure of reaching these goals.

In or outside of the International Monetary Fund (IMF) programmes, Pakistan has basically followed neoliberal policies since the late 1980s, a time period which coincides with the rise and perpetuation of broadly neoliberal– and in a narrow sense the ‘Washington Consensus’ – policies, which have neither provided macroeconomic stability, nor economic growth in any sustained way.

Moreover, centrality of ‘market fundamentalism’ under the neoliberal assault of the last four decades or so, whereby public sector capacity has diminished to mainly ‘facilitator’ of private sector, and not as an equal partner under a mutualistic or symbiotic relationship to protect the demos from the otherwise ‘profit-over-people’ mindset.

This has been so evidently brought through the acute increase in income and wealth inequality with negative consequences in terms of apparently greater elite capture of public policy and lack of regulation, and greater outsourcing has significantly reduced the capacity of the public sector to deliver, and overall reduced the resilience of the economy to deliver in areas, like the public health sector, disaster management, environmental and social protection, or the education sector, for instance, where the cracks in the public service delivery became more glaring where the shock of Covid pandemic hit, and which need significant improvement in the face of ongoing existential threat of climate change crisis and ‘Pandemicene’ phenomenon.

Social democratic policies of the likes in Scandinavian countries where public sector adopted a ‘middle way’ between capitalism and socialism, or between market fundamentalism and economic nationalism, or of the likes in China for instance, that since the same period of 1980s has prevented that country from experiencing ‘price shock therapy’ or neoliberal policies – which for instance have been followed in Pakistan or Russia in the name of aggregate demand squeeze, or austerity policies – by adopting ‘dual track’ or ‘strategic pricing’ policy whereby instead of applying significant economic growth, export and employment sacrifice to attain short-term macroeconomic stabilization, or price stability, prices of strategically important sectors – for employment, exports, domestic production, and food security, for instance –were controlled, while inflation was also controlled from better regulation and administrative governance of markets.

Political parties in Pakistan have yet to indicate this clarity, whereby which philosophical stream they wish to float. This is the essential question at hand, what kind of role they see for the public and private sectors, including the way price stability is reached, how export, foreign investment and domestic production will be increased, and that is through a ‘facilitating’ role of the public sector to the private sector, and how by continuing to choose this neoliberal model can the economic resilience, and sustainability be achieved to meet the existential challenges of climate change crisis and ‘Pandemicene’ phenomenon.

The four-decade experience of neoliberal policies came crashing in the wake of the Global Financial Crisis of 2007-08, the misgivings of the austerity policies in both developed and developing countries in terms of increasing income and wealth inequalities, and with it the perpetuation of the elite capture of policies favouring ‘profit-over-people’ vested interest in general, a serious lack of resilience of economies in the wake of the Covid pandemic, a fast-unfolding of climate change crisis, a lack of regulation and preponderance of market fundamentalism giving way for weak global supply chains, and increased tax evasion and, much more, multinational companies’ profit shifting to low tax countries and tax havens, not to mention rising public debt distress and recurring stubbornly high levels of inflation, especially in the global South, have all pointed towards the need to revisit allegiance to neoliberal policy framework.

Yet, this question alludes mainly policy discourse whether in the economic manifestoes of political parties, media, government’s discussion with the IMF whether in or outside of the IMF programmes, the current caretaker economic team’s policy reflections.

This grave intellectual poverty in economic policy needs quick correction, and in this regard it is exceedingly important that political parties for once should not just provide economic slogans, but more importantly clarify the economic philosophical route that will be taken, addressing in turn the serious objections with regard to the performance of the neoliberal model.

Copyright Business Recorder, 2023